Online realty

CHICAGO (MarketWatch) -- Internet-based real-estate brokers praised a proposed settlement between the U.S. Department of Justice and the National Association of Realtors, saying that it will allow them to more fully compete with traditional brokers.

The proposed settlement, announced on Tuesday, stems from a 2005 antitrust lawsuit against the real-estate trade group, according to a DOJ news release. NAR policies challenged in the lawsuit were believed to prevent consumers from receiving the full benefits of competition provided by the online newcomers. They also discouraged discounting, the release said.

The case was scheduled to go to trial in July.

Specifically, the lawsuit challenged some of the group's rules on how traditional brokers were permitted to interact with a new breed of broker based online.

These online brokers allow their customers to access listings via password-protected sites instead of requiring a broker to facilitate their searches, according to the release. The Virtual Office Web sites or VOWs, often increased the productivity of brokers affiliated with the systems, which translated to lower commission rates for sellers and rebates for buyers.

ZipRealty, for example, gives its buyers a 20% rebate. In New Jersey, where rebates aren't allowed, a 20% donation is given to the United Way, said Pat Lashinsky, CEO of Zip.

Prior to the lawsuit's filing, multiple listing services permitted traditional brokers to withhold their listings from VOWs (a policy suspended during the investigation). NAR didn't, however, permit brokers to withhold listings from a traditional broker member of an MLS.

"Traditional brokers could essentially handicap the new model," said Guy Wolcott, co-founder of online broker Sawbuck Realty; online competitors didn't have all the listings.

Another rule that the DOJ took issue with: One that prevented a broker from educating consumers about homes for sale through a VOW, then referring those customers to other brokers, for a fee, to complete the deal.

"Some of the VOWs that focused on referrals also passed along savings to consumers as a result of increased efficiencies," the DOJ said in a news release. "Collectively, NAR's policies prevented consumers from receiving the full benefits of competition in the residential real estate industry."

If approved by the U.S. District Court in Chicago, the proposed 10-year settlement would require the association to change the policies and resolve the competitive concerns. NAR also will enact a new policy to guarantee Internet-based brokerages won't be treated differently.

In a news release, NAR pointed out that it is not required to make payments or admit any liability or wrongdoing in connection with the settlement.

Richard F. Gaylord, president of the National Association of Realtors, called the settlement a win-win for the industry and consumers.

"Competition is alive and well in the real estate industry. In fact, the competitive nature of our industry is even more apparent in times of market turmoil like those we are currently experiencing," Gaylord said in a news release.

"The DOJ implicitly acknowledges the value brought to the real estate market by the more than 800 MLSs across the country to make buying and selling a home easier. The MLSs are healthy, solid and sound, and will continue to deliver benefits to members and consumers."

Indeed, those listings are important for virtual offices to function.

"Internet entrepreneurs have been thirsty for this MLS data for at least a decade," said Glenn Kelman, CEO of Redfin, another online realty firm. "For a long time, the conventional wisdom in Silicon Valley was that you didn't want to take data from the Realtors because they didn't want to share it with you."

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